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Dec 13, 2017 05:05 PM IST | Source: Moneycontrol.com

Unitech case: SC stays NCLT order allowing government to take over embattled real estate firm

Attorney General concedes that the government should not have approached the NCLT

A day after the Supreme Court expressed serious apprehension about the manner in which the Centre moved the National Company Law Tribunal (NCLT) to take control of embattled real estate firm Unitech Ltd’s board without seeking its permission, the apex court on Wednesday decided to stay the NCLT order.

Attorney General KK Venugopal conceded that “this should not have happened. The government should not have approached NCLT when Supreme Court was seized of the matter relating to Unitech’s failure to refund homebuyers,” said a lawyer present at the hearing on Wednesday.

The stay of NCLT’s order Friday means that Unitech’s promoter Sanjay Chandra, who is currently in jail, can now resume negotiations from prison for sale of assets to generate Rs 750 crore that he has been asked to deposit in court by end of this month.

According to Insolvency expert Sumant Batra, the Central government would be best advised to withdraw the petition filed in NCLT and seek leave of the Supreme Court to initiate the take over process.

Some legal experts say that “it would have been best had the government taken over the company and turned it around by getting a new promoter, just as what it did in the case of Satyam,” said Abhishek Dubey, a Delhi-based lawyer.

"The government for once made a move to protect the interest of stuck home buyers but committed a huge procedural error by not approaching the top court first. A court or tribunal does not have a carte blanche to pass an order of its liking when a case is brought before it. The rules of procedure must be followed while administering justice. NCLT did not help the home buyers’ cause by deviating from the procedure and allowing government’s application without directing the government to take leave of the Supreme Court first. ‘Procedural justice’ is a means to achieve ‘substantive justice’ and the Supreme Court today punished the government for not adhering to procedure. However, I am hopeful that the government will get another opportunity soon," he said.

On Tuesday, the Supreme Court had expressed its unhappiness over the Friday order and had said that NCLT should have taken its leave before allowing the government to take control over the management of the company.

The Supreme Court asked the Centre on Tuesday why it did not seek its permission to move NCLT for suspension of the company’s directors. It is disturbing to see that the NCLT passed an order when the top court was hearing the Unitech case. It should have taken leave of the apex court before allowing the Centre to take over Unitech Ltd, said the apex court.

A bench comprising chief justice Dipak Misra and Justices AM Khanwilkar and DY Chandrachud considered the request of additional solicitor general Tushar Mehta on Tuesday that one more day be given to him to seek instruction from the concerned authorities on the appeal of Unitech Ltd against the order of NCLT.

Unitech, on its part, argued through its lawyer that NCLT passed a hurried order without hearing it. It said that the Supreme Court had allowed its promoter Sanjay Chandra to negotiate from jail to sell assets to generate funds to pay back buyers and yet the Centre had breached discipline and moved NCLT.

On Monday, the Supreme Court bench of Chief Justice Dipak Misra, Justice DY Chandrachud and Justice AM Khanwilkar had agreed to hear on Tuesday the plea on behalf of the embattled civil construction and housing development company Unitech Ltd challenging the recent order of the company law tribunal allowing the Centre to take over its management.

Chief Justice Dipak Misra had observed on Monday that “We are more concerned with home buyers (rather than) with the company and fixed deposit holders/investors. Home buyers are not investors.”

Unitech in its appeal had said on Monday that, “Despite clear directions issued by the SC, the tribunal in complete disregard to the said orders proceeded to pass an order which makes the entire process and monitoring being implemented by the apex court a nullity and renders it impossible for the petitioners (Unitech and its directors) to comply with the SC orders.”

Senior advocate Ranjit Kumar, appearing for Unitech Ltd and its jailed promoters, referred to the recent NCLT order and said the takeover of the management of the company by the Centre would make it difficult for them to deposit Rs 750 crore as directed by the apex court to safeguard the interests of homebuyers.

"How do I comply with the Supreme Court order? My bank accounts have been frozen on November 21," the company’s lawyer had said.

The National Company Law Tribunal (NCLT), on December 8, had suspended all the eight directors of the realty firm over allegations of mismanagement and siphoning of funds and had authorised the Centre to appoint its 10 nominees on the board. In its petition filed under section 241 of the Companies Act, 2013, the government had requested the tribunal to remove the eight directors and said that the company has over Rs 6,000 crore debt and over 16,000 undelivered units from a total of nearly 70 projects.

The NCLT, in its order, had also said the government must give names of its nominees by December 20 and restrained Unitech's eight suspended directors from selling their personal and company properties.

The apex court had on October 30 said jailed businessman Chandra will be granted bail only after the real estate group deposited money with its registry by December end. The top court had earlier directed the jail authorities to facilitate Chandra's meeting with his company officials and lawyers so that he could arrange money to refund the home buyers as well as for completing the ongoing housing projects.         I

Chandra is seeking interim bail from the apex court after the Delhi High Court on August 11 had rejected the plea in a criminal case lodged in 2015 by 158 home buyers of Unitech projects Wild Flower Country and Anthea Project located in Gurgaon.
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